The online fashion retailer Boohoo is launching an independent review of its UK supply chain after allegations that some factories in Leicester that sell clothes to Boohoo paid workers below the minimum wage and failed to protect them from the coronavirus outbreak.
Boohoos share price plunged by as much as 15% on Wednesday morning after it announced the review, meaning almost £2bn has been wiped off the value of the company since Monday.
One analyst said the further share price fall was a reflection that “serious questions” remained about the retailers supply chain, despite the review. Retailers including Next and Asos have removed all Boohoo clothing from sale.
Boohoo, which owns brands including Pretty Little Thing and Nasty Gal, said the review would be led by Alison Levitt QC, the former head of Mishcon de Reyas white collar crime unit, and said it would initially invest £10m towards “eradicating malpractice” in its supply chain.
The company said in a statement that the board was “shocked and appalled by the recent allegations” and was committed to working to rebuild the reputation of textile manufacturing in Leicester.
The Boohoo group chief executive, John Lyttle, said the board was taking the matters seriously, adding: “We will not hesitate to terminate any relationships where noncompliance with our code of conduct is found.”
City analysts welcomed Boohoos move, with Wayne Brown at Liberum saying the companys response “should start to help rebuild confidence that Boohoo intends to do the right things”.
He wrote in a note: “While serious questions will remain for some time, today is the first positive step forward in transparency.”
Boohoo will provide an update from its supply chain review in September, when it publishes its half-year results, and further updates are due in January 2021.
The group will also launch an independent third-party supply chain review, to be carried out by the ethical audit and compliance specialists Verisio and Bureau Veritas.
Boohoo said it had begun to investigate allegations of worker mistreatment as soon as it was made aware of them.
It said the company named in this weekends Sunday Times report was not and had never been a supplier. It said that to date it had not found any evidence of suppliers paying workers £3.50 an hour, or less than the current legal minimum wage of £8.72 for those aged 25 and over.
However, Boohoo said it had found evidence that two suppliers had failed to comply with its code of conduct and Boohoo has terminated its relationships with both of those firms.
Boohoo had previously strongly denied any responsibility for the alleged bad practices of its Leicester suppliers.
The fast fashion brand confirmed that about 40% of the products it sells are made in the UK, although it does not own or operate any factories where its clothing is manufactured.